Sail Tender Response Points To Silico Manganese Glut

This is apart from what the Maharashtra Elektrosmelt, a SAIL subsidiary can supply, which is 50,000 tonnes of ferro manganese and about 30,000 tonnes of silico manganese. Low cost Durgapur producers who have a power rate of about 206 paise have come in a big way as tenderers. They have offered about 55,000 tonnes but Durgapur producers pay high freight on their manganese ore and not as competitive in ferro manganese as they are in silico manganese.

In silico manganese also the Durgapur parties have quoted near to 50,000 tonnes and will be strong competitors to the M P producers. There are also those large producers like Jindal Raigarh who have captive power plant and so also Navbharat Ferro and Ispat Alloys who also have captive power plants and can compete effectively with Durgapur producers.

 

The prices quoted by the different parties have been kept a secret but the general feeling is that they will be very competitive and may be lower than what SAIL had conceded last year. The feeling is that the ferro manganese price would be between Rs 18,000 to 19,000 per tonne against the current SAIL price of Rs 19,750. The silico manganese price would be around Rs 21000 per tonne against the present Rs 22,500 per tonne.

Considering the cost cutting measures that SAIL is now taking, it may not be in a position to offer its subsidiary, MEL any better price than that of the market, arrived at by the tendering process which would cut down the margin for MEL.

Therefore MEL may have to shift to single product like ferro manganese to cut costs and thus oust the rest. It would then be able to meet most of the demand for ferro manganese. In any case it is sounding the death knell of the M P units who will be hurt the most.

Liberalisation and the rule of market forces in ferro alloys initiated from the late eighties has had one good effect i.e., prices of ferro alloys have been under control and they are on par with the world prices despite very high power costs. However, there has been a great waste of capital as more than a hundred units have come into the industry, over 30 of whom are closed, others are working at less than 50 per cent. A power intensive industry like ferro alloys needs a national policy where power rate and tax incentives need to be uniform to discourage fly by night operators, who seek only temporary gains, as has happened in ferro alloys. The executive director of VISL said that he was able to get from NTPC thanks to the Union Ministry of power 13 million units of power per month at a tariff rate of only Rs 1.20 per unit compared to Rs 4.20 per unit of the electricity board in Karnataka. This would have helped him to revive his two ferro silicon furnaces and export 70 per cent of the production.

Unfortunately, the electricity board was acting like a dog in the manger and wanted to charge Rs 4.20 paise per unit even on this NTPC power as against a wheeling charge of only around 10 per cent which is the accepted practice. KEB also confirmed the allegation of the VISL official and said that every industry in Karnataka cross-subsidised the lower tariff for agriculture and VISL should pay the local tariff.

This is patently discriminatory as Sandur Manganese & Iron Ores, which is in Karnataka, has been getting NTPC power at a rate of around 160 paise for the last two years. This NTPC power is an extra allocation to exporting units and is not from the state quota of NTPC power. But, its availability at lesser cost helps the units to produce for export and create exchange earnings and also employment.

Further, this NTPC power is being made available at low rates in various other states like Andhra, M P, Maharashtra and Orissa and it has helped the ferro alloys industry to survive and export. Karnataka, by its high power tariff, has virtually killed the whole of arc furnace steel industry and now it is hurting even the export efforts.

VISL is no doubt a perpetually sick company and there is little hope that it will come out of its sickness. It was taken over by SAIL some years back, and has given very low power tariff for five years. SAIL has invested over Rs 200 crore in putting up various facilities. That did not prevent VISL from going sick and it was to go under BIFR when it was fully taken over last year and integrated as a SAIL unit, a millstone around SAILs neck.

Because of power cuts SAIL put up a blast furnace to produce pig iron and closed down the costly electric arc furnaces producing pig iron and then gave a loan of Rs 50 crore to get 25 mw power from a hydel station at Rs 1.53 per unit but nothing seems to save VISL. Even if its gets NTPC power at Rs 1.20 it will not make any money as the present ferro silicon prices are low in the world market and there is hardly any money in such exports.- Gilbert Lobo